'The challenge of expansion': Young farmers face ever-higher price wall in getting land

According to Farm Credit Canada’s 2017 data, the value of an acre of farmland in the province increased 10.2 per cent and the average acre ranged from $1,321 in east-central regions to $1,925 in west-central areas.

The 29-year-old organic farmer is on the cusp of inking another deal, one that could put his strawberries in Safeway and Sobey’s stores.

But Tenkink’s farm — some might call it a garden — sits on scarcely more than one acre of land. He leases the plot from his parents.

“I’m now faced with the challenge of expansion,” he said. “That’s kind of a good problem to have.”

It is, nonetheless, a problem. And it’s gotten consistently worse as land values across Saskatchewan surge, year after year. According to Farm Credit Canada’s 2017 data, the value of an acre of farmland in the province increased 10.2 per cent and the average acre ranged from $1,321 in east-central regions to $1,925 in west-central areas.

That’s a boon for landowners. It’s a sign of confidence in Saskatchewan agriculture. But it’s also bad news for tenant farmers — and a major barrier for young people like Tenkink, who are trying to break into the industry.

“A conventional farming setup is not even an option,” said Tenkink. “The first few years will have to be done on rented land. There is just no way around that.”

Last year’s hike follows more than a decade of steady price rises. Land values rose 7.5 per cent in 2016, 9.4 per cent the year before that, and a whopping 18.7 per cent in 2014.

J.P. Gervais, FCC’s chief agriculture economist, says the price surge is bringing land values in line with crop revenues.

“We’ve had tremendous growth in income,” said Gervais. “It makes a whole lot of sense.”

More fundamentally, it’s a question of supply and demand. Everyone is trying to expand, says Gervais. But few people are putting new land on the market.

Foreign investment has also gone up, but Gervais considers that a marginal factor. Most of the pressure is coming from farmers within the province competing for scarce land.

Low interest rates — and the consequent dearth of good investment opportunities — have played a significant role.

“Think of it from the perspective of a seller: If I’m going to sell land, I’ll get some capital to deploy somewhere else,” he said. “Where else am I going to invest?”

Derek Dewar has no plans to put his roughly 4,500 acres on the market. He comes from a farming family — with stories of the Great Depression breeding in an instinctive frugality. He said the reticence to sell is about more than just interest rates. It’s deeply embedded in the “psychology of farming.”

“An old farmer who was even more frugal than my dad said, ‘You don’t sell land, you buy land!’ ”

That’s precisely what he plans to do, “cautiously,” to carry on the tradition.

“I have two boys that are farming,” he said. “The object is to expand.”

It’s as much about costs as revenues. Dewar agrees with Gervais that cash receipts have improved in recent years. But so have inputs, like fertilizer and machinery. To cope with the squeeze, farmers have to get more productive. To boost productivity, they need to spread their costs across more acres.

“With a lower per-unit return, you have to have economies of scale,” he said.

Land in Dewar’s region has appreciated more than elsewhere: 14.2 per cent in 2017 alone. That’s sent the average up to $1,755 per acre.

Western Saskatchewan has generally seen higher increases than the east, including a 16.6-per-cent spike in the west-central region. The northeast, by contrast, has seen a more modest 1.5-per-cent rise.

FCC assessors say that has to do with recent weather patterns. In the northeast, wet conditions delayed harvest in 2016 and left crop sitting out on the fields. That undercut the rationale for expansion, and left less money to pay for it.

But that hardly helps Tenkink. He’s not looking for thousands of acres, just a few dozen at most. He figures it will still cost him hundreds of thousands of dollars.

“I’ve been looking everywhere in the Prince Albert to Saskatoon to Nipawin triangle,” he said.

“From what I’ve seen in the past few years, the prices are just steadily creeping up.”

Gervais agrees that starting out in farming has become “a little harder” in recent years. But he says there’s help. FCC has programs to help young farmers secure low-interest loans.

“You’ve got more options now than you used to,” he said. “We try to help that next generation of farmers because we know that’s good for the industry.”

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